Tags: Shiller | Minibubble | Stock | Housing

Shiller: Minibubble Grows in Stock, Housing Markets May Pop

Tuesday, 04 May 2010 08:19 AM

Yale economist and Case/Shiller index co-founder Robert Shiller says there's a minibubble brewing in the stock and housing markets.

“It wasn't just because of rate cuts,” Shiller says. “It was also because of government stimulus and bailouts.”

“So the question is: Are we at risk for even more price increases, and another bubble? I think we are at risk, but I'm not predicting it," he says. "I think it's more likely we don't do so well from here,” he told The Motley Fool.

Home prices have been going up for nearly a year now, according to Case/Shiller data, Shiller notes, an event that would normally cause him to extrapolate an upward trend because historically home prices have shown a lot of momentum.

Instead, Shiller says, “we're in a very unusual circumstance because of the massive bailouts, the homebuyer tax credits, the Fed's purchase of mortgage-backed securities — and these things are coming to an end.”

“So I don't trust the trend that we have,” Shiller says. “I'm worried that it might get reversed."

John Paulson, the hedge fund manager famous for betting against mortgage securities, is now bullish on the U.S. housing market and the economy, MarketWatch reports.

During a conference call with investors Paulson said he was concerned earlier this year about a potential double-dip recession.

"I'm not concerned about that at all today," Paulson said, adding that house prices have stabilized and could climb 8-to-10 percent nationwide in 2011.

With the "final leg" of a rising housing market, "the outlook for 2011 could be very strong," Paulson said.

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Yale economist and Case/Shiller index co-founder Robert Shiller says there's a minibubble brewing in the stock and housing markets. It wasn't just because of rate cuts, Shiller says. It was also because of government stimulus and bailouts. So the question is: Are we...
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2010-19-04
 

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